Variable definitions
| Variable | Definition |
|---|---|
| Restate | The indicator equals to one if the firm’s 10-K is subsequently restated, and zero otherwise |
| Audit fee | Natural log of the total audit fees charged by the auditor that year |
| Total delay | Percentage of flights delayed more than 15 minutes in terms of total flights on Friday & Sunday |
| Total delay Friday | Percentage of flights delayed more than 15 minutes in terms of total flights on Friday only |
| Total delay Sunday | Percentage of flights delayed more than 15 minutes in terms of total flights on Sunday only |
| Big4 | The indicator variable takes the value of 1 if the auditor is Deloitte, Ernst & Young, KPMG, or PriceWaterhouseCoopers |
| ROA | The ratio of income before extraordinary items to the beginning total assets for that year |
| Loss | The indicator variable takes the value of 1 if the client showed negative income before extraordinary operations and o otherwise |
| Ln(Size) | Natural log of total client assets for that period |
| Leverage | The sum of the firm’s short-term debt and long-term debt is divided by total assets |
| Book-to-market | Firms’ book value of equity is divided by the market value of equity |
| Receivable | Accounts receivable is divided by total assets |
| Inventory | Total inventory divided by total assets at the end of the year |
| Busy | The indicator equals one if the company’s fiscal year ends on December 31, and 0 otherwise |
| Auditor change | The indicator equals one if the auditor changes in the fiscal year, and zero otherwise |
| Debt | Total liability to total assets |
| Unqualified opinion | The indicator equals one if the auditor issues an unqualified opinion without any additional language, and zero otherwise |
| Major exchange | The indicator equals one if the firm is a public company trading on a major exchange, and zero otherwise |
| Internal control weakness | An indicator variable equal to 1 for firm years disclosing an internal control weakness in one or more of the following reports: Section 302 quarterly certifications, 404(a) management assessment, and/or 404(b) audit report, 0 otherwise |
| Restatement | An indicator variable equals 1 if the firm announces a restatement during year t, and 0 otherwise |
| Auditor tenure | Number of years the current auditor serves the company |
| The net tone in 10K | The percentage of positive words minute negative words from Loughran and McDonald’s (2011) dictionary |
| Variable | Definition |
|---|---|
| Restate | The indicator equals to one if the firm’s 10-K is subsequently restated, and zero otherwise |
| Audit fee | Natural log of the total audit fees charged by the auditor that year |
| Total delay | Percentage of flights delayed more than 15 minutes in terms of total flights on Friday & Sunday |
| Total delay Friday | Percentage of flights delayed more than 15 minutes in terms of total flights on Friday only |
| Total delay Sunday | Percentage of flights delayed more than 15 minutes in terms of total flights on Sunday only |
| Big4 | The indicator variable takes the value of 1 if the auditor is Deloitte, Ernst & Young, KPMG, or PriceWaterhouseCoopers |
| ROA | The ratio of income before extraordinary items to the beginning total assets for that year |
| Loss | The indicator variable takes the value of 1 if the client showed negative income before extraordinary operations and o otherwise |
| Ln(Size) | Natural log of total client assets for that period |
| Leverage | The sum of the firm’s short-term debt and long-term debt is divided by total assets |
| Book-to-market | Firms’ book value of equity is divided by the market value of equity |
| Receivable | Accounts receivable is divided by total assets |
| Inventory | Total inventory divided by total assets at the end of the year |
| Busy | The indicator equals one if the company’s fiscal year ends on December 31, and 0 otherwise |
| Auditor change | The indicator equals one if the auditor changes in the fiscal year, and zero otherwise |
| Debt | Total liability to total assets |
| Unqualified opinion | The indicator equals one if the auditor issues an unqualified opinion without any additional language, and zero otherwise |
| Major exchange | The indicator equals one if the firm is a public company trading on a major exchange, and zero otherwise |
| Internal control weakness | An indicator variable equal to 1 for firm years disclosing an internal control weakness in one or more of the following reports: Section 302 quarterly certifications, 404(a) management assessment, and/or 404(b) audit report, 0 otherwise |
| Restatement | An indicator variable equals 1 if the firm announces a restatement during year t, and 0 otherwise |
| Auditor tenure | Number of years the current auditor serves the company |
| The net tone in 10K | The percentage of positive words minute negative words from |
Source(s): Table by authors
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